Current:Home > ScamsChina expands access to loans for property developers, acting to end its prolonged debt crisis-DB Wealth Institute B2 Expert Reviews
China expands access to loans for property developers, acting to end its prolonged debt crisis
View Date:2024-12-24 21:44:31
BANGKOK (AP) — China has rolled out new rules meant to expand access to commercial bank loans for property developers as Beijing doubles down on its effort to end a prolonged crisis in the real estate industry.
The policies will allow real estate companies to use bank loans pledged against commercial properties such as offices and shopping malls to repay their other loans and bonds and to cover operating expenses. They were announced late Wednesday by the People’s Bank of China, the National Financial Regulatory Administration and the Finance Ministry.
Beijing has moved this week to stabilize ailing financial markets and boost the economy by freeing up more money for lending in various ways. That includes cutting required bank reserves.
The flurry of new measures and pronouncements from senior Communist Party officials about the need to stabilize financial markets and build confidence in the economy, the world’s second largest, appears to reflect a renewed determination to get growth back on track.
Dozens of developers have defaulted on their debts after the government cracked down on excessive borrowing in the industry several years ago. The largest, China Evergrande, is still trying to resolve more than $300 billion in debts and a Hong Kong court is due to hold a hearing on its restructuring plans next week.
The latest policies are not a full reversal of the effort to rein in debt and control risks in the property industry.
The new rules say the bank loans cannot be used to buy commercial housing or rental housing or to start new construction or buy land. Loans cannot exceed 70% of the appraised value of the property being used as collateral and should generally last a maximum of 10 years, with an absolute limit of 15 years.
They also order banks to fully conduct due diligence before and after loans are issued to mitigate and minimize risks.
It’s unclear what impact the new rules might have on the overall crisis gripping the property market. Land sales have long been a major revenue source for local governments that now are grappling with mounting debts. At the same time, stalled construction of new homes has hit contractors and suppliers of construction materials and home furnishings.
In a research note, UBS economists said “the pace and potential size of such loans remain uncertain as banks will likely watch the commerciality and risks of such loans.” But they added that the move was a “significant step” to increase support for developers.
Sales of new homes and home prices have been falling, discouraging consumers from spending since Chinese families tend to have much of their wealth tied up in property. The industry as a whole accounts for about a quarter of business activity in China.
“For developer financing to fundamentally and sustainably improve, property sales need to stop falling and start to recover, which could require more policy efforts to stabilize the property market,” the UBS report said.
veryGood! (69272)
Related
- Ryan Reynolds Clarifies Taylor Swift’s Role as Godmother to His Kids With Blake Lively
- US bars ex-Guatemala President Alejandro Giammattei from entry 3 days after he left office
- Extreme cold weather causing oil spills in North Dakota; 60 reports over past week
- Did Jacob Elordi and Olivia Jade Break Up? Here's the Truth
- Bluesky has added 1 million users since the US election as people seek alternatives to X
- Arnold Schwarzenegger detained by customs officers at Munich airport over luxury watch
- 'I just wish I knew where they were': How an online cult is tied to 6 disappearances
- Southern Charm's Olivia Flowers Shares Heartbreaking Update One Year After Brother Conner's Death
- Oprah Winfrey Addresses Claim She Was Paid $1 Million by Kamala Harris' Campaign
- Mariska Hargitay, 'Law & Order: SVU' stars celebrate 25th anniversary milestone in NYC
Ranking
- Ashton Jeanty stats: How many rushing yards did Boise State Heisman hopeful have vs Nevada
- Dominican authorities arrest US rapper Tekashi 6ix9ine on domestic violence charges
- China, Philippines agree to lower tensions on South China Sea confrontations
- Boyfriend of woman fatally shot when they turned into the wrong driveway testifies in murder trial
- Rafael dissolves into a low pressure system in the Gulf of Mexico after hitting Cuba as a hurricane
- Arnold Schwarzenegger detained by customs officers at Munich airport over luxury watch
- After 604 days, Uvalde families finally have DOJ's long-awaited school shooting report
- What If the Clean Energy Transition Costs Much Less Than We’ve Been Told?
Recommendation
-
Jon Gruden joins Barstool Sports three years after email scandal with NFL
-
Japan signs agreement to purchase 400 Tomahawk missiles as US envoy lauds its defense buildup
-
9/11 victim’s remains identified nearly 23 years later as Long Island man
-
Iran missile strikes in Pakistan show tension fueled by Israel-Hamas war spreading
-
Digital Finance Research Institute Introduce
-
Britain's King Charles III seeks treatment for enlarged prostate, Buckingham Palace says
-
Fundraising off to slow start in fight over Missouri abortion amendment
-
Origins of king cake: What to know about the sweet Mardi Gras treat plus a recipe to try